RS

MEMBER DIARY

The Economy and The Stimulus

On my way home from work today, I heard people all over the radio (mostly FoxNews: Neil Cavuto) talking about the current economic conditions.

Yes – we’ve had four days of gains on the market.

A market that has cut in half over the last year – with almost half it’s losses in the last few months alone.

Four days of gain (amounting to only a few hundred points) is not really that spectacular. We’re not out of the recession. Don’t start cashing out your 401K to retire to Tahiti yet.

One commentator I listened to continuously attributed this week’s rally to the Stimulus package. She also kept saying that we’re on the way out of the recession.

First of all, nothing going on right now is directly attributable to the Stimulus package. The people that want that money are still trying to read through the legislation to figure out how to GET the money (something most of the people that voted “Yes” didn’t do). None of the Stimulus money has gone anywhere yet. If the Stimulus is causing this rally, then it shows that a large part of the economic situation is based on hype – and that is largely fueled by the media. If we’re rallying without the money being spent, then we could have (and are) coming back and having no need for the mounds of debt attached to the Stimulus.

The direct effects of the Stimulus on our economy really aren’t going to be visible until probably fall – if even by then. Organizations need to apply for the money, then get their projects underway, spend the money, and after the people working on those projects recover from their current situation, they can start to spend “expendable” income again (at which point their projects will probably be over and they’ll be unemployed again). It’s going to be a long time until we see the effects of Obama’s drunken spend-fest.

Secondly, to say we’re coming out of the recession is nothing but conjecture and speculation. It was only late last year that it was announced we were in a recession. It takes a long time to monitor the pace of the economy – it will take equally as long to officially recognize that we’re out of the woods.

A few weeks ago, Obama mentioned that the Dow (and other market indicators) are like political polls. No, he wasn’t saying he is using the stock market to judge how well he is doing (that’s probably the last I’ll defend him) – his point is that polls are only useful as they are looked at through extended time periods. Now – back to the usual tone – this week, he flip-flopped and said that things aren’t as bad as they seem and they’re better than they were. So – while the getting is good, he’s jumping on the band wagon. The market’s up, so let’s play on it!

Mr. Obama, you were right the first time – we can’t say anything until we see a trend. Four days of modest increase is not a trend. If we see these increases continue for another week or two, then cautious optimism can start. Right now, we’re looking at the Dow like looking at a tracking poll from Day 1 to Day 2. It doesn’t mean anything. Compare Day 1 to Day 8, to Day 15, to Day 29. Give it time and see where it goes.

As much as I want piles of cash, we aren’t in the clear yet. Calm yourself.

And also (Mr. Obama) – please stop addressing the nation. Every time you do that, the market dips. People in the business world can predict where your agenda is going, and it’s obvious they see failure at the end of the road.